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Valuation Report Aviv Park, Pancev 12 Milosa Obrenovica Street, July 2012 on vo, Serbia Pancevo, Serbia
Transcript
Page 1: Aviv

Valuation Report

Aviv Park, Pancevo

12 Milosa Obrenovica Street,

July 2012

Report on

Pancevo, Serbia

Pancevo, Serbia

Page 2: Aviv

Jones Lang LaSalle d.o.o. Beograd

Bulevar Mihajla Pupina 6, Novi Beograd,

Srbija

tel. +381 11 2200 101

fax +381 11 2200 102

PIB 100347859

Jones Lang LaSalle d.o.o Beograd Bulevar Mihajla Pupina 6, Novi Beograd

Raiffeisen Bank 265-1100310000111-07

Registrovan u Agenciji za privredne registre pod brojem 1-86293-00

Matični Broj 17371436

Mr Eyal Bartov, CFO

Aviv Arlon Ltd.

7 Jabotinsky St. Ramt Gan

Israelf

Belgrade, 15 July 2012

To Whom It May Concern

RE: Appraisal for Retail Park and Development Land in Pancevo

We understand that the appraisal carried out by our firm dated 5 July 2012 will be used by Aviv

Arlon Lt.d )”Avi vArlon“( for the updatin gof its annual financial statements for June .2012

We consent to the use of our Appraisal Report in Aviv Arlon financial statements and to its

publication should Aviv Arlon be required to do so. However, we take no responsibility or liability

for any misrepresentation of the appraisal information in the prospectus or any other publication for

public disclosure.

Best regards,

Bryan Beaton, MRICS

Joint Head of Valuation

Jones Lang LaSalle d.o.o., Serbia

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Valuation Report of Aviv Park, Pancevo, Serbia

COPYRIGHT © JONES LANG LASALLE IP, INC. 2012. All Rights Reserved 1

5th July 2012

Dear Madam,

VALUATION OF THE AVIV PARK, PANCEVO, SERBIA

We have pleasure in reporting to you in accordance with our valuation engagement letter dated June 2012 regarding the above property. We understand that the valuation is required for Financial Reporting purposes.

We inspected the property on 5th June 2012 and have carried out all the necessary enquiries with regard to investment value, planning issues and investment considerations.

We have not been instructed to carry out a building survey or environmental risk assessment. We have been provided with floor areas by the Client and have assumed that these have been prepared in accordance with SRPS standard.

Basis of Valuation

Our Valuation has been prepared in accordance with the RICS Valuation Standards - Global (7th Edition). The basis of valuation is the Market Value of the property, as at the date of valuation, defined by the RICS as:

“The estimated amount for which an asset or liability should exchange on the valuation date between a willing

buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each

acted knowledgeably, prudently and without compulsion.”

For the subject purposes the above Market Value definition under RICS meets the Fair Value measurement requirement under IFRS 40.

The full interpretive commentary on this definition is attached at Appendix 3. The report is subject to, and should be read in conjunction with, the attached General Terms and Conditions of Business and our General Principles Adopted in the Preparation of Valuations and Reports, which are attached in the Appendices 1 and 2.

Having regard to the contents of this Report, we are of the opinion that the Market Value of the Aviv Park Pancevo , located at Milosa Obrenovica Street, Pancevo, Serbia, subject to the assumptions outlined in the following Report, as at 30 June 2012, was in the region of:

Aviv Arlon Holding d.o.o. Vladimira Popovića 6 11000 Belgrade Serbia For the attention of: Mr. Nir Saar

Jones Lang LaSalle d.o.o. Bulevar Mihajla Pupina 6

Novi Beograd, Srbija

Bryan Beaton

Tel. +381 11 2200 101 Fax +381 11 2200 102

[email protected]

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Valuation Report of Aviv Park, Pancevo, Serbia

COPYRIGHT © JONES LANG LASALLE IP, INC. 2012. All Rights Reserved 2

MARKET VALUE OF AVIV PARK PANCEVO STANDING INVESTMENT

€24,900,000

(Twenty Four Million Nine Hundred Thousand Euro)

MARKET VALUE OF THE AVIV PARK PANCEVO SURPLUS LAND

€7,000,000

(Seven Million Euro)

Market Value is understood as the value of the property estimated without regard to cost of sale or purchase, and without offset for any associated taxes. Therefore no allowances have been made for any expenses of realisation, or for taxation, which might arise in the event of a disposal. The property is considered as if free and clear of all mortgages or other charges which may be secured thereon.

The above value assumes Klupko d.o.o. has 100% share in the property

Transaction costs typically comprise the following:

(a) Stamp duty is 2.5%; however it is not applicable for the transfer of shares of an asset holding company. However, if the shares of a company are sold to acquire real estate i.e. and Special Purpose Vehicle (SPV) then the Stamp Duty is 0.3% of the Market Value.

(b) Court registration and Notarial fees: vary according to transaction, however these are not significant.

(c) VAT is chargeable on first transaction of a property improved after 1 January 2005 and it is not charging on any later transaction. VAT rate is 18% with exception for residential properties where is 8%. Sale of share is VAT exempt for the first sale.

(d) Agent’s fees at 1-3% of purchase price plus VAT. It is more likely that a fee of 2% would be charged on an investment disposal and a higher fee around 3% charged on the acquisition of land.

This Report on the Aviv Park Pancevo has been prepared for and only for Aviv Arlon Holding d.o.o. for financial reporting purposes. The property has been valued as at 30 June 2012 on the basis of Market Value for financial reporting and for no other purposes. To the fullest extent permitted by law, we do not accept or assume responsibility or liability in respect of the whole or any part of the report or valuation for any other purpose or to any other person or entity to whom the report or valuation is shown or disclosed or into whose hands it may come, whether published with our consent or otherwise, except where expressly agreed by our prior consent in writing.

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Valuation Report of Aviv Park, Pancevo, Serbia

COPYRIGHT © JONES LANG LASALLE IP, INC. 2012. All Rights Reserved 3

Finally, and in accordance with our normal practice we confirm that this report is confidential to the party to whom it is addressed for the specific purpose to which it refers. No responsibility whatsoever is accepted to any third party and neither the whole of the report, nor any part, nor references thereto, may be published in any document, statement or circular, nor in any communication with third parties without our prior written approval of the form and context in which it is to appear.

Yours faithfully,

Bryan Beaton MRICS Joint-Head of Valuation Department

Jones Lang LaSalle d.o.o.

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Valuation Report of Aviv Park, Pancevo, Serbia

COPYRIGHT © JONES LANG LASALLE IP, INC. 2012. All Rights Reserved 4

Contents

1 Executive Summary ............................................................................................................................................... 2

2 Location .................................................................................................................................................................. 5

2.1 Macro Location ........................................................................................................................................................ 5

2.2 Micro Location.......................................................................................................................................................... 6

3 Description ............................................................................................................................................................. 7

3.1 Site ........................................................................................................................................................................... 7

3.2 Services ................................................................................................................................................................... 7

3.3 Property Description, Construction and Condition ................................................................................................... 8

3.4 Accommodation ....................................................................................................................................................... 8

3.5 Soil Conditions and Contamination .......................................................................................................................... 9

4 Legal ..................................................................................................................................................................... 10

4.1 Tenure ................................................................................................................................................................... 10

4.2 Title No. ................................................................................................................................................................. 10

4.3 Tenancy ................................................................................................................................................................. 10

4.4 Planning ................................................................................................................................................................. 11

5 Market Commentary ............................................................................................................................................ 13

5.1 Serbian Economy ................................................................................................................................................... 13

5.2 Serbian Retail Market Overview ............................................................................................................................ 16

5.3 Pancevo Retail Market ........................................................................................................................................... 20

6 Valuation Commentary ........................................................................................................................................ 21

6.1 Valuation Methodology .......................................................................................................................................... 21

6.2 Valuation Approach - Income Approach ................................................................................................................ 21

6.3 General Valuation Assumptions ............................................................................................................................. 21

6.4 Specific Valuation Assumptions ............................................................................................................................. 22

6.5 SWOT Analysis ...................................................................................................................................................... 23

6.6 Valuation Summary – Standing Investment ........................................................................................................... 23

6.7 Valuation Approach - Residual Method.................................................................................................................. 23

6.8 General Valuation Assumptions ............................................................................................................................. 24

6.9 Specific Valuation Assumptions – Residual Method .............................................................................................. 25

6.10 SWOT Analysis ...................................................................................................................................................... 27

6.11 Valuation Summary – Surplus Land....................................................................................................................... 27

7 List of Documents Used in Valuation Report .................................................................................................... 29

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Valuation Report of Aviv Park, Pancevo, Serbia

COPYRIGHT © JONES LANG LASALLE IP, INC. 2012. All Rights Reserved 1

Appendices

Appendix 1 ......................................................... General Principles Adopted in the Preparation of Reports and Valuations Appendix 2 ........................................................................................................ General Terms and Conditions of Business Appendix 3 ................................................................................................................................... Definition of Market Value Appendix 4........................................................................................................................................................Location Map Appendix 5............................................................................................................................................................... Site Plan Appendix 6.................................................................................................................................. Extract from Land Register Appendix 7......................................................................................................................................................... Photographs Appendix 8.......................................................................................................................................................... Calculations

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Valuation Report of Aviv Park, Pancevo, Serbia

1 Executive Summary

Address 12 Milosa Obrenovica Street, Pancevo, Serbia

Location The subject property is located in Pancevo, in the province of Vojvodina, approximately 15km northeast from the capital city of Belgrade. Pancevo is located on the left bank of Danube River.

The subject property is located east from the centre of Pancevo, 1,900 m from the main square (Trg Slobode) in the centre of the city

The subject property is located within a block bordered by Prvomajska Street, Milosa Obrenovica Street and Bore Stankovica Street. Prvomajska Street is also part of international highway route E70 (Belgrade – Timisoara – Bucharest).Milosa Obrenovica Street is also an important road and it connects the subject property with the city centre.

Description In total there is 73,647 sq m of land area. The existing retail park takes up approximately 47,000 sq m.

Aviv Park in Pancevo is big box format retail park. So far all phases of this development have been finished except the last phase. First phase of the development comprised of the big box supermarket which is currently occupied by DIS d.o.o. Krnjevo. All buildings have only ground floor. Other phases comprised of retail units, some of which are big box format. Buildings are extending from north to south. North side of the plot represents the main entrance from Milosa Obrenovica Street. There is also an entrance on the southern side of the plot from Prvomajska Street. There is a central parking area which is located between two buildings. Each of the buildings has numerous retail units facing the parking lot located in the middle. There are two retail units, cafe and food retailer, located in the middle of the parking lot.

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Valuation Report of Aviv Park, Pancevo, Serbia

Accommodation Current accommodation is 18,921 sq m GLA for the existing part of the development.

Tenure The land and existing are held in freehold ownership by Klupko d.o.o.

Tenancy The total GLA of the Aviv Park is 18,921 m2. According to the Tenant list, we were provided with all of the retail units are leased (18,126 m2), only the playground and another small area is not leased (795 m2). So far (four phases completed) there are 38 retail units, distributed among retailer types as shown in the table below. There are also 38 different brands, some of which are held by the same retailer. The biggest part of the retail park are occupied by DIS Supermarket (24%), different fashion retailers (29%) such as C&A, New Yorker and Takko; and DIY “Uradi Sam” (10%).

Key Assumptions Standing Investment – Income Approach DCF

(a) After expiry of the current lease agreements we have adopted the annual indexation according to HICP at the level of 2.5%, applied on the anniversary of signing the lease agreement;

(b) A 3-month void period has been adopted after the current lease agreements expiry. The expiry void covers the leasing void as well as the leasing costs, utilities costs for vacant areas and the incentives for new tenants;

(c) We have also adopted an allowance in respect of unpaid rent and other non-recoverable operating expenses at 1% and 2% of total gross income respectively;

(d) We have applied 2% on-going vacancy rate starting from the 2nd year of our calculations;

(e) We have applied 9.25% discount rate in our calculations.

(f) We have applied 9.00% exit yield in our calculations.

Surplus Land – Residual Valuation

(a) We have assumed a total of 15,000 sq m will be built

(b) The total projected Gross Market Rental Income assuming 100% occupancy is €1.8 million. We have adopted total non-recoverable costs of 5.0% (€0.64 million), which include Loss of Rent of 3% and non-recoverables at 2.0%. Therefore the Total Net Income (assuming Fully Let) is €1.71 million.

(c) Based on the previous phases we have assumed that the property is 100% pre-let.

(d) We have applied an initial yield of 9.25%.

(e) This indicates a GDV less letting fees (€136 thousand) of €18.4 million.

(f) Construction period 2 years.

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Valuation Report of Aviv Park, Pancevo, Serbia

(g) We have adopted a finance rate of 7%.

(h) We have adopted a developer’s cost of 20% (€1.7 million) to reflect the level of profit that be required by a purchaser to undertake the development project.

(i) We deduct interest on the site (€1.0 million) to give a Residual Site Value of (€7.0 million).

Valuation at 30 June 2012 Having regard to the contents of this Report, we are of the opinion that the Market Value of the part of the Aviv Park located in Pančevo, Serbia subject to the assumptions outlined in the following Report, as at 30 June 2012, was in the region of:

MARKET VALUE OF THE AVIV PARK PANCEVO

STANDING INVESTMENT

€24,900,000

(Twenty Four Million Nine Hundred Thousand Euro)

MARKET VALUE OF THE AVIV PARK PANCEVO SURPLUS LAND

€7,000,000

(Seven Million Euro)

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Valuation Report of Aviv Park, Pancevo, Serbia

2 Location

2.1 Macro Location

The subject property is located in Pancevo, in the province of Vojvodina, approximately 15km northeast from the capital city of Belgrade. Pancevo is located on the left bank of Danube River.

Pancevo is the centre of petrochemical industry of Serbia. Three very important petrochemical companies are located in Pancevo – “NIS Petrol” petroleum refinery, “HIP Petrohemija” and “HIP Azotara”. Danube Port, one of the most important river ports in Serbia, is located in Pancevo.

Pancevo has an urban population of around 74,000 inhabitants, while the whole municipality has around 122,000 inhabitants. The total area of the municipality is 148.8 km2. Pancevo is also the administrative centre of the South Banat district of Serbia.

Pancevo is connected to the capital City of Belgrade through international highway route E70 (Pancevacki drum) and Pancevacki Bridge. Pancevo also has a very good connection with other major cities and towns in Vojvodina – Novi Sad, Vrsac and Zrenjanin.

Map 1: Location of Pancevo in national context of the Serbia

Source: Jones Lang LaSalle

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Valuation Report of Aviv Park, Pancevo, Serbia

2.2 Micro Location

The subject property is located east from the centre of Pancevo, 1,900 m from the main square (Trg Slobode) in the centre of the city.

Pancevo is composed of mostly middle to lower class residential neighbourhoods with couple of large industrial developments. The municipality of Pancevo is bordered by the municipalities of Opovo, Kovacica, Alibunar, Kovin and the City of Belgrade. The city of Pancevo is actually closer that some Municipalities of Belgrade already and has better transport routes.

The subject property is located in the central part of Pancevo. The subject property is located within a block bordered by Prvomajska Street, Milosa Obrenovica Street and Bore Stankovica Street. Prvomajska Street is also part of international highway route E70 (Belgrade – Timisoara – Bucharest).Milosa Obrenovica Street is also an important road and it connects the subject property with the city centre. The shape of the block is triangular and there are Roda big box supermarket and park located within the same block. The subject property is bordered by “FMZ Pancevo” industrial development in the east, residential neighbourhoods in the south and the north and Roda supermarket and NIS Petrol warehouses further on in the west. Other important sites are: Pancevo railway station (1,600 m), the Municipality of Pancevo (1,900 m) and Belgrade Airport (38 km). The subject property is also located in the close proximity of heavy industry – Glass factory (1 km) and “NIS Petrol” petroleum refinery (4.5 km).

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Valuation Report of Aviv Park, Pancevo, Serbia

3 Description

3.1 Site

Characteristics

The subject property has good visibility and exposure having in mind that it is located between two important roads in Pancevo. It benefits from frontage on Prvomajska Street and Milosa Obrenovica Street. The main entrance is located on Milosa Obrenovica Street and the frontage is 200 m. The visibility from Milosa Obrenovica Street is partial decreased by the green area planted with trees on the sidewalk. The frontage on the Prvomajska Steet is 170 m, but looking from the main entrance to the retail park, this is a back part of the land plot which is still undeveloped. The terrain is flat.

The subject property is located in the Cadastral Municipality of Pancevo. The land plot comprises of cadastral parcel number 4733. The total size of the land plot is 73,647 m2 according to the land book number 11835.

The shape of the land plot is irregular – polygonal. This shape of the land plot is adequate for the multi-phase development with several buildings, where each phase would comprise of new building in different part of the land plot, what is the case of the Aviv Park.

The subject property is located in the middle of the block bordered by Prvomajska Street, Milosa Obrenovica Street and Bore Stankovica Street. Rest of the block is occupied by Roda supermarket and park in the west and “FMZ Pancevo” industrial development in the east.

According to the previously provided Extract of Act on Urban Planning, maximum allowed gross area of the buildings can be 156,000 m2. According to the same document, the subject building should have 700 parking places. According to the same document, the site coverage allowance is up to 80%.

Access

The general accessibility to the retail park is good since it is located between two very important roads, one of which is a connection to city centre – Milosa Obrenovica Street, and the other is part of international highway route E70 (Belgrade – Timisoara – Bucharest) – Prvomajska Street, and it can be accessed from both of them. There is an access from the north through Prvomajska Street, while from Milosa Obrenovica Street cars can access the property from both directions.

The subject site has a really good connection to city centre (Trg Sloboda, 1,900 m) through Milosa Obrenovica Street. The site is located 2.4 km from Danube River port, 3.5 km from railway cargo terminal, 150m from passenger railway terminal of “Beovoz” and 38 km from Belgrade Airport.

There are three bus lines passing the sight through Milosa Obrenovica Street: 2 (Kotez II – Dolovo), 3 (Jabuka III – Stari Tamis) and 6 (Snezana – Rafinerija Nafte Pancevo). Frequency of the buses is every half an hour during workdays.

3.2 Services

We understand that all mains services are available to the property including electricity, water and main drainage. We have assumed that the capacity of the services is adequate for the future use of the property but have been unable to verify that this is the case.

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Valuation Report of Aviv Park, Pancevo, Serbia

3.3 Property Description, Construction and Condition

Aviv Park in Pancevo is big box format retail park. So far all phases of this development have been finished except the last phase. First phase of the development comprised of the big box supermarket which is currently occupied by DIS d.o.o. Krnjevo. All buildings have only ground floor. Other phases comprised of retail units, some of which are big box format. Buildings are extending from north to south. North side of the plot represents the main entrance from Milosa Obrenovica Street. There is also an entrance on the southern side of the plot from Prvomajska Street. There is a central parking area which is located between two buildings. Each of the buildings has numerous retail units facing the parking lot located in the middle. There are two retail units, cafe and food retailer, located in the middle of the parking lot. There is a sidewalk, 4.8 m wide, along each building in front of the entrances. Sidewalk is made of interlocking concrete paving tiles. There is a roof overhang above the sidewalk. The height of the overhang is 4 m and the width is 3.4 m. There are two public toilets located on each side of the park (one in each building). Around 90% of the units have WC within the unit. There is announcement system and video surveillance in the park.

Construction

Buildings are made of prefabricated concrete structure with reinforced concrete slab with an insulated corrugated tin panel facade.

The height of the ceiling is approximately 6.2 m (sample measure: Deichman warehouse, height to the bottom of the beam is 5.6 m). The clear ceiling height in retail units is around 3.4 m. The roof is made of prefabricated beams covered in insulated corrugated tin panels with hydro insulation covering. Most of the units have suspended gypsum ceilings. Some of the units have gypsum boards.

The flooring depends on retail unit. In the hypermarket and DIY unit it is treated finished concrete. In other retail units it is covered in ceramic tiling or combination of ceramic tiling and laminate. Entrance areas and the WC also have tiled floors.

Retail frontage is made of aluminum framed large glass shop windows. Each retail unit entrance has automatic door with ventilation unit above the door.

Each retail unit has an air-condition system with different solutions depending on the unit. Each unit has fire alarm and protection system. Some of the units have video surveillance.

Warehouse areas do not have ceilings, while floors are treated finished concrete with large bay doors for goods receipt at the back of each unit.

The construction structure is appropriate for this kind of development.

3.4 Accommodation

We have relied upon the floor areas according to the client and confirm that we have not made any check measures. We understand that noted areas are according to the Serbian standard SRPS.U.C2.100 from 2002 (former JUS standard).

The planned building areas according to JUS standard are given in tables below:

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Valuation Report of Aviv Park, Pancevo, Serbia

Table 1: Accommodation Schedule

Accomodation Use Share

Rentable Area

(sqm)

Ground Floor Retail 100.00%

18,921.00

Total 100%

18,921.00

3.5 Soil Conditions and Contamination

We have not been provided with a soil test report for construction purposes.

We have not been provided with any formal information on the environmental conditions of the site, however our inspection did not disclose and abnormalities.

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Valuation Report of Aviv Park, Pancevo, Serbia

4 Legal

4.1 Tenure

According to the Ownership document number 11835, which was provided to us, there is a freehold ownership over the subject land plot (cadastral parcel number 4733 in the cadastral municipality of Pancevo), and over the buildings built on the land.

4.2 Title No.

According to the Ownership document number 11835, which was provided to us, the subject site consists of one cadastral parcel number 4733, Cadastral Municipality of Pančevo, whose area is 73,647 m2. The property is registered to belong to Klupko d.o.o.

There is a mortgage over the property and lease agreements to Erste registered in the Netherlands.

4.3 Tenancy

The total GLA of the Aviv Park is 18,921 m2. According to the Tenant list, we were provided with all of the retail units are leased (18,126 m2), only the playground is not leased (795 m2). So far (four phases completed) there are 38 retail units, distributed among retailer types as shown in the table below. There are also 38 different brands, some of which are held by the same retailer. The biggest part of the retail park are occupied by DIS Supermarket (24%), different fashion retailers (29%) such as C&A, New Yorker and Takko; and DIY “Uradi Sam” (10%).

Table 2: List of tenants by categories

Retailer type Nr of units

Area Percentage

Supermarket 1 4,427 24%

Fashion 13 5,203 29%

Shoes 2 823 5%

Cosmetic/Drogerie 3 1,047 6%

Home 1 1,170 6%

Electronics 2 820 5%

Food/Café 5 622 3%

Kiosk/Exchange office

2 41 0%

DIY 1 1,862 10%

Books 1 105 1%

Sport equipment 2 738 4%

Kids (fashion&toys)

5 1,268 7%

Total 38 18,126

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Valuation Report of Aviv Park, Pancevo, Serbia

Graph 1 – Lease Expiration Schedule

Source: Aviv Arlon

The WALL is 6.4 years. This is above the average in Serbia and the Capital City Belgrade.

Table 3 – Retailer Profile by Store Size

Source: Aviv Arlon

Only 3% of the retail park has been unlet. It is not a front facing unit.

4.4 Planning

Retailer Profile

Stratification by Store Size

Size # Units

not rented area

% Area not rented

actually rented area total area MGR

% of Total Area

0-49m2

6 0.00 0% 197.00 197 € 37,404 1.06%

100-199m2

8 0.00 0% 1,094.00 1,094 € 148,524 5.86%

200-299m2

7 0.00 0% 1,742.00 1,742 € 223,176 9.33%

300-399m2

5 0.00 0% 1,771.00 1,771 € 229,452 9.49%

400-499m2

3 0.00 0% 1,231.00 1,231 € 140,250 6.59%

500-749m2

4 545.00 24% 1,762.00 2,307 € 252,444 12.36%

750-999m2

2 0.00 0% 1,793.00 1,793 € 234,048 9.60%

1000-1499m2

2 0.00 0% 2,247.00 2,247 € 255,042 12.03%

>1500m2

2 0.00 0% 6,289.00 6,289 € 645,960 33.68%

39 545.00 3% 18,126.00 18,671 € 2,166,300 100%

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Valuation Report of Aviv Park, Pancevo, Serbia

The property lies within the jurisdiction of the Municipality of Pančevo Council whose planning policies are contained within the General plan of Pančevo.

Summary of conditions of Act on Urban Planning Conditions:

• Footprint can be 80%.

• Scheme can have 2 basement levels + GF + 6

• Max. GBA is 156,000 m2 (max. build up index is 2.1.)

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Valuation Report of Aviv Park, Pancevo, Serbia

5 Market Commentary

5.1 Serbian Economy

The pace of economic recovery was already slowing sharply during the course of 2011, after a promising first half of the year. In 2012, economic risks will heighten further, given the uncertainty elsewhere in Europe, combined with the considerable domestic challenges.

The International Monetary Fund has signalled that it will not support the pre-election Serbian government's 2012 budget plans, and the country's precautionary stand-by arrangement (SBA) was put on hold in January. Since then, the situation has deteriorated further, as government spending was driven upward prior to the 6 May parliamentary election. In addition, spending has risen because of the need to keep employment at the Smederevo-based steel plant intact following US Steel's exit in late January. The firm employs some 5,000 people and ranks among Serbia's largest in terms of industrial production and exports. Moreover, several weeks of cold weather have further damaged the economy. Serbia's fiscal council warned in mid-March that the budget gap has already hit 37.2 billion dinars in the first two months of 2012, and public debt has breached the 45%-of-GDP limit. The council cautioned that public debt could reach 51% of GDP by the end of 2012.

Encouragingly, the leaders of the 27 EU member states unanimously agreed on 2 March 2012 to grant Serbia candidate status. There is now a clear roadmap for Serbia to achieve full-fledged membership in the bloc. Nevertheless, as was the case in gaining candidate status, further progress in bilateral talks with Kosovo will be a precondition for launching official accession negotiations. Assuming that the political situation remains stable and that successive governments remain cooperative and committed to economic and legislative reform, a timeframe around 2020 seems realistic for Serbia's EU accession, although accession could occur sooner if future governments take rapid steps to implement reforms. Still, Serbia's integration progress will also depend on the state of the EU itself, as the on-going Eurozone debt crisis raises uncertainty about the union's future shape and attractiveness to new members. Currently, Serbia remains far behind the post-communist countries that joined the EU in 2004–07 in terms of standard of living and completing the transition to a full market economy.

The fall in economic activity continued in the first quarter of 2012, reflecting for its major part the downturn in industrial production caused by the extremely cold weather in February and the one-month suspension of operations of the Smederevo Steel Plant.

Inflation continued to fall in Q1 2011 coming to 2.0%. as a result of rising prices of fruit and vegetables and petroleum products.

The industrial production in the Republic of Serbia in April 2012, when compared to April 2011, decreased by 2.2% and in relation to 2011 average, it decreased by 6.0%. In the period January- April 2012, relative to the same period 2011, industrial production decreased by 4.7%.

Observed as divided by sections, in April 2012 compared to the same month 2011, the trends were noted as follows:

• the section of electricity, gas, steam and air conditioning supply – fall of 11.7%,

• the section of mining and quarrying – the same level and

• the section of manufacturing – growth of 0.1%.

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Valuation Report of Aviv Park, Pancevo, Serbia

The overall external trade in the Republic of Serbia for the period January – April 2012 amounted to:

• USD 9585.7 million - which was a 4.4% decrease compared to the same period 2011;

• EUR 7296.7 million - which was a 0.9% increase compared to the same period 2011.

The major foreign trade partners in exports in the reference period (January 2012 – April 2012) were: Germany (USD 424.3 million), Italy (USD 337.6 million) and Bosnia and Herzegovina (USD 333.7 million).

The major foreign trade partners in imports in the reference period (January 2012 – April 2012) were: the Russian Federation (USD 834.9 million), Germany (USD 649.0 million) and Italy (USD 518.3 million).

The retail trade turnover in the Republic of Serbia in March 2012 compared with March 2011, increased by 10.5% at current prices and by 4.4% at constant prices.

In March 2012, compared to February 2012, turnover of retail trade increased by 29.9% at current prices and by 26.9% at constant prices.

Accoording to currently available official data, the unemployment rate in Serbia in 2011 was 23.6%, in Belgrade 20.0%, in Vojvodina 23.9%. In the Region of Šumadija and Western Serbia, unemployment rate was 23.8%,and in the Region of Southern and Eastern Serbia 26.7%.

The average net salaries and wages paid in April 2012 in the Republic of Serbia totalled 42,215 dinars (€378). Compared to the average net salaries and wages paid in March 2012, this was 4.1% increase in nominal terms and 3.5% increase in real terms.

In spite of interventions of the NBS, dinar exchange rate has been experiencing a constant depreciation pressure since the beginning of the year, achieving its lowest historical value of 117 per Euro at the beginning of June 2012. This is due to intensified imports of energy-generating products in the period of extraordinarily low temperatures, psychological effects intensified by freezing the arrangement with the IMF and presidential and government elections held in May 2012.

Table 4: Serbian Economic Key Market Indicators

Serbia 2007 2008 2009 2010 2011 2012f 2013f 2014f 2015f

GDP - % YOY Growth 5.4 3.8 -3.5 1.0 1.6 0.2 2.6 4.0 4.2

CPI/Inflation - % YOY Growth 6.4 12.4 8.1 6.1 11.1 4.7 5.0 5.0 5.0

Unemployment Rate - % 19.1 14.4 16.9 20.0 23.6 24.3 23.0 21.9 20.8

Short Term Interest Rate - % 4.42 9.61 10.34 14.16 11.51 40.0 / / /

Source: HSI Global Insight, June 2012

Political Situation

The old Serbian government has achieved its main foreign policy goals in March 2012, by obtaining the official EU Candidate Status. There is now a clear roadmap for Serbia to achieve full-fledged membership of the bloc; however, a lengthy process lies ahead and Serbia will have to undertake many internal reforms to meet the EU's political and economic membership criteria. As was the case in gaining candidate status, one of the main stumbling blocks will be Serbia's relationship with Kosovo; Serbia will need to continue steps towards improving relations with its former breakaway province before accession negotiations can be opened.

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Valuation Report of Aviv Park, Pancevo, Serbia

The election held in May returned the populist Serbian Progressive Party (SNS) as the single largest parliamentary party, while in an upset, the SNS leader Tomislav Nikolić secured victory over the exBoris Tadić, representative of the Democratic Party. Given the narrow mthe centre-left Democratic Party (DS) is better positioned to reSocialist Party of Serbia (SPS) and other smaller political factions. Interway to try to form the next administration, although in theory talks could last until July or even August.

Catchment Area and Spending Power

Primary catchment area for Aviv Park includes approximately 279,000 inhabitants and secondary catchmentarea includes approximately 117,000 inhabitants living in 9 municipalities on the territory which occupies 4,696 km2.

Table 5: Catchment Area for Aviv Park

Municipality Area km2 Population census 2011

Pancevo 755 122,252Kovin 730 33,725Alibunar 602 19,780Kovacica 419 25,259Opovo 203 10,475Total 2,709 211,491

Source: Jones Lang LaSalle

Primary Catchment area includes the whole population of the City of Pancevo and the whole population of bordering municipalities of Alibunar, Kovacica, Kovin and Opovo.

Graph 2: Retail Spending in Vojvodina

According to the official statistical data, in 2011 Vojvodina households spent 53.7goods. In terms of the structure of the retail spending, 71on alcoholic drinks and tobacco, 9% on clothes and footwmaintenance and 3% on restaurants and hotels.

eturned the populist Serbian Progressive Party (SNS) as the single largest parliamentary party, while in an upset, the SNS leader Tomislav Nikolić secured victory over the exBoris Tadić, representative of the Democratic Party. Given the narrow margin of the SNS parliamentary victory,

left Democratic Party (DS) is better positioned to re-form a coalition alliance with the third placed Socialist Party of Serbia (SPS) and other smaller political factions. Inter-party negotiations are currway to try to form the next administration, although in theory talks could last until July or even August.

Catchment Area and Spending Power

Primary catchment area for Aviv Park includes approximately 279,000 inhabitants and secondary catchmentarea includes approximately 117,000 inhabitants living in 9 municipalities on the territory which occupies 4,696

tchment Area for Aviv Park

Population census 2011 Catchment area Average Net Salary 2011

122,252 122,252 448 € 33,725 33,725 405 € 19,780 19,780 255 € 25,259 25,259 257 € 10,475 10,475 302 € 211,491 211,491

Primary Catchment area includes the whole population of the City of Pancevo and the whole population of bordering municipalities of Alibunar, Kovacica, Kovin and Opovo.

: Retail Spending in Vojvodina in 2011

atistical data, in 2011 Vojvodina households spent 53.7% of total expenditure on retail cture of the retail spending, 71% was spent on food and non-alcoholic beverages, 8

drinks and tobacco, 9% on clothes and footwear, 9% on home furniture, equipment and % on restaurants and hotels.

eturned the populist Serbian Progressive Party (SNS) as the single largest parliamentary party, while in an upset, the SNS leader Tomislav Nikolić secured victory over the ex-president

argin of the SNS parliamentary victory, form a coalition alliance with the third placed

party negotiations are currently under way to try to form the next administration, although in theory talks could last until July or even August.

Primary catchment area for Aviv Park includes approximately 279,000 inhabitants and secondary catchment area includes approximately 117,000 inhabitants living in 9 municipalities on the territory which occupies 4,696

Average Net Salary 2011

Primary Catchment area includes the whole population of the City of Pancevo and the whole population of

% of total expenditure on retail alcoholic beverages, 8%

quipment and

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Valuation Report of Aviv Park, Pancevo, Serbia

In 2011, a household in Catchment Area spent increase compared to 2010. Very modest increase is projected for the n

In 2011, total Catchment Area retail spending per anretail spending will increase 3-5%.

In terms of categories of retail goods, in 2011 Catchment Area spent beverages, € 10,554,000 on alcoholic drinks and tobacco, on home furniture, equipment and maintenance and

5.2 Serbian Retail Market Overview

The retail market has experienced a fair degree of modernisation in recent years with formats such as regional shopping centres, community centres and shopping galleries opening across the country. However, compared to most CEE markets overall supply of these modern retail chmarkets and bazaars still represent the mainstay of the Serbian retail market. This is a consequence of the fact that Serbia started transition process almost ten years after other exmodernization of its property supply.

Shopping Centres Supply

Serbian shopping center provision per ‘000 inhabitants stands at 42 sq m (included all new shopping centre schemes included those below 7,000 sq m and build after the politicaprovision can be even lower if we limit the existing shopping centre to only three modern regional malls such as Ušće (43,000) and Delta City (28,000) in Belgrade and Kragujevac Plaza in Kragujevac (22,000 sq m).

Total shopping center stock in Serbia, including regional shopping malls as well as neighborhood shopping centres and shopping galleries and smaller schemes below 7,000 sq m, is estimated to be ca. 300,000 sq m. However, total modern regional shopping mall

In terms of geographical aspect of the existing stock, Belgrade has the highest share with 54% of the country’s stock. The second ranked city is Kragujevac with the market share of 12%, the third is Niš with 8% and the second largest Serbian city Novi Sad participates with only 4% in the total stock.

Graph 3: Shopping Centre stock in the Serbian cities

Source: Jones Lang LaSalle

The average annual shopping centre supply in Serbia in the last ten years was approximately 25,market reached its peak in 2007 and 2009 with 67,000 and 68,000 sq m of new shopping centre stock

In 2011, a household in Catchment Area spent €227/per month on average. This figure represents 10% increase compared to 2010. Very modest increase is projected for the next two years.

In 2011, total Catchment Area retail spending per annum stood at €19,852,000. In 2012, we estimate that the

f retail goods, in 2011 Catchment Area spent €90,861,000 on food and nonlcoholic drinks and tobacco, €11,721,000 on clothes and footwear, €11,221,000

nt and maintenance and €3,778,000 on restaurants and hotels.

experienced a fair degree of modernisation in recent years with formats such as regional shopping centres, community centres and shopping galleries opening across the country. However, compared to most CEE markets overall supply of these modern retail channels remains limited and small outlets, kiosks, markets and bazaars still represent the mainstay of the Serbian retail market. This is a consequence of the fact that Serbia started transition process almost ten years after other ex-communist CEE countriemodernization of its property supply.

Serbian shopping center provision per ‘000 inhabitants stands at 42 sq m (included all new shopping centre schemes included those below 7,000 sq m and build after the political and economic reforms in 2000). Such low provision can be even lower if we limit the existing shopping centre to only three modern regional malls such as Ušće (43,000) and Delta City (28,000) in Belgrade and Kragujevac Plaza in Kragujevac (22,000 sq m).

otal shopping center stock in Serbia, including regional shopping malls as well as neighborhood shopping centres and shopping galleries and smaller schemes below 7,000 sq m, is estimated to be ca. 300,000 sq m. However, total modern regional shopping mall stock stands at 93,000 sq m.

In terms of geographical aspect of the existing stock, Belgrade has the highest share with 54% of the country’s stock. The second ranked city is Kragujevac with the market share of 12%, the third is Niš with 8% and the

argest Serbian city Novi Sad participates with only 4% in the total stock.

: Shopping Centre stock in the Serbian cities

The average annual shopping centre supply in Serbia in the last ten years was approximately 25,market reached its peak in 2007 and 2009 with 67,000 and 68,000 sq m of new shopping centre stock

€227/per month on average. This figure represents 10%

In 2012, we estimate that the

nd non-alcoholic €11,721,000 on clothes and footwear, €11,221,000

experienced a fair degree of modernisation in recent years with formats such as regional shopping centres, community centres and shopping galleries opening across the country. However, compared

annels remains limited and small outlets, kiosks, markets and bazaars still represent the mainstay of the Serbian retail market. This is a consequence of the fact

communist CEE countries and was late in

Serbian shopping center provision per ‘000 inhabitants stands at 42 sq m (included all new shopping centre l and economic reforms in 2000). Such low

provision can be even lower if we limit the existing shopping centre to only three modern regional malls such as Ušće (43,000) and Delta City (28,000) in Belgrade and Kragujevac Plaza in Kragujevac (22,000 sq m).

otal shopping center stock in Serbia, including regional shopping malls as well as neighborhood shopping centres and shopping galleries and smaller schemes below 7,000 sq m, is estimated to be ca. 300,000 sq m.

In terms of geographical aspect of the existing stock, Belgrade has the highest share with 54% of the country’s stock. The second ranked city is Kragujevac with the market share of 12%, the third is Niš with 8% and the

The average annual shopping centre supply in Serbia in the last ten years was approximately 25,000 sq m. The market reached its peak in 2007 and 2009 with 67,000 and 68,000 sq m of new shopping centre stock

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Valuation Report of Aviv Park, Pancevo, Serbia

respectively. The higher levels of supply in these two years is explained by the delivery of the two largest shopping centre schemes in Belgrad

Graph 4: Shopping centre supply in Serbia

Source: Jones Lang LaSalle

In terms of new supply, in the first quarter Kragujevac Plaza was opened with 22,000 sq m GLA. KragujevacPlaza is the first modern large sized shopping mall out of Belgrade, developed according the western standards. The mall has very large catchment area, the whole central Serbia, which is attracted by well known international brands such as New Yorker, Aldo, Bata, Chicco, United Colors of Benetton, Beba kids, La Coste, Carpisa etc. that have rented the units here.

Major Existing Shopping Centers in Serbia

Three modern shopping malls in Serbia are Ušće Shopping Center and Delta City in Belgrade and KragujevPlaza in Kragujevac.

Ušće shopping center is the largest modern shopping centre in Belgrade and Serbia as well. It is a regional shopping mall developed by MPC Properties/Merrill Lynch and opened in spring 2009. It disposes of 43,000 sq mGLA and is located on prime New Belgrade location, between two boulevards, in the proximate vicinity of Branko’s Bridge which connect New Belgrade and downtown. Good and easy accessible location, 1,300 parking lots in the underground garage, as well as the best supply ofdomestic retailers make this center regional shopping mall that has the catchment area of the whole city population. Anchor tenants in Ušće shopping center are Zara, C&A, New Yorker, Home Centar and supermarket Idea that spreads on ca. 4,000 sq m. This shopping mall attracts the highest demand particularly from the brands opening their first store in Serbia, such as new entrant C&A.

Ušće Shopping Center

respectively. The higher levels of supply in these two years is explained by the delivery of the two largest shopping centre schemes in Belgrade, Ušće (43,000 sq m) and Delta City (28,000 sq m).

: Shopping centre supply in Serbia

In terms of new supply, in the first quarter Kragujevac Plaza was opened with 22,000 sq m GLA. KragujevacPlaza is the first modern large sized shopping mall out of Belgrade, developed according the western standards. The mall has very large catchment area, the whole central Serbia, which is attracted by well known international

o, Bata, Chicco, United Colors of Benetton, Beba kids, La Coste, Carpisa etc.

Major Existing Shopping Centers in Serbia

Three modern shopping malls in Serbia are Ušće Shopping Center and Delta City in Belgrade and Kragujev

Ušće shopping center is the largest modern shopping centre in Belgrade and Serbia as well. It is a regional shopping mall developed by MPC Properties/Merrill Lynch and opened in spring 2009. It disposes of 43,000 sq

ted on prime New Belgrade location, between two boulevards, in the proximate vicinity of Branko’s Bridge which connect New Belgrade and downtown. Good and easy accessible location, 1,300 parking lots in the underground garage, as well as the best supply of branded goods of famous international and domestic retailers make this center regional shopping mall that has the catchment area of the whole city population. Anchor tenants in Ušće shopping center are Zara, C&A, New Yorker, Home Centar and

dea that spreads on ca. 4,000 sq m. This shopping mall attracts the highest demand particularly from the brands opening their first store in Serbia, such as new entrant C&A.

respectively. The higher levels of supply in these two years is explained by the delivery of the two largest

In terms of new supply, in the first quarter Kragujevac Plaza was opened with 22,000 sq m GLA. Kragujevac Plaza is the first modern large sized shopping mall out of Belgrade, developed according the western standards. The mall has very large catchment area, the whole central Serbia, which is attracted by well known international

o, Bata, Chicco, United Colors of Benetton, Beba kids, La Coste, Carpisa etc.

Three modern shopping malls in Serbia are Ušće Shopping Center and Delta City in Belgrade and Kragujevac

Ušće shopping center is the largest modern shopping centre in Belgrade and Serbia as well. It is a regional shopping mall developed by MPC Properties/Merrill Lynch and opened in spring 2009. It disposes of 43,000 sq

ted on prime New Belgrade location, between two boulevards, in the proximate vicinity of Branko’s Bridge which connect New Belgrade and downtown. Good and easy accessible location, 1,300 parking

branded goods of famous international and domestic retailers make this center regional shopping mall that has the catchment area of the whole city population. Anchor tenants in Ušće shopping center are Zara, C&A, New Yorker, Home Centar and

dea that spreads on ca. 4,000 sq m. This shopping mall attracts the highest demand particularly

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Valuation Report of Aviv Park, Pancevo, Serbia

Delta City is the second largest shopping centre in Belgood access to the new Ada Bridge. The total size of this regional shopping mall is 28,000 sq m GLA , It disposes of 1,200 parking lots in the underground garage. After the opening in 2007, the mall shopping center in Belgrade and Serbia, but since the opening of Ušće, these two malls have been sharing the market and catchment area not only of New Belgrade, but the whole city as well. However, with the opening of new Ada Bridge, the residents from Čukarica and Rakovica (southwestern part of the city) now have easier access to the mall. Anchor tenants in the mall are Zara, New Yorker, Terranova, Marks&Spencer and Maxi supermarket spreading on ca. 3,200 m2. The rumors have spread that Delta City.

Delta City

Kragujevac Plaza is the first modern large sized shopping mall opened out of Belgrade. It has 22,000 sq m and the catchment area of the whole central Serbia. Kragujevac Plaza was opened very good mix of the tenants seen for the first time in this part of the country. Among the brands present in the mall are New Zorker, Beba Kids, Carpisa, La Coste, Lisca, Chicco and many others. It has 110 shops, an entertainment center which consist of a 6 hall Cinema , various entertainment such Bowling, climbing walls, laser tag, billiards and an indoor toddler playground, as well as

Kragujevac Plaza

Retail Parks

Retail parks are also new schemes on the market. Currently, there are only two retail parks opened in phases one in the city of Pančevo – 14 km from Belgrade and another in Kragujevac, the largest city and the most important city in Central Serbia.

Delta City is the second largest shopping centre in Belgrade but the first opened, located in New Belgrade with good access to the new Ada Bridge. The total size of this regional shopping mall is 28,000 sq m GLA , It disposes of 1,200 parking lots in the underground garage. After the opening in 2007, the mall shopping center in Belgrade and Serbia, but since the opening of Ušće, these two malls have been sharing the market and catchment area not only of New Belgrade, but the whole city as well. However, with the opening of

residents from Čukarica and Rakovica (southwestern part of the city) now have easier access to the mall. Anchor tenants in the mall are Zara, New Yorker, Terranova, Marks&Spencer and Maxi supermarket spreading on ca. 3,200 m2. The rumors have spread that H&A will open its first Serbian store in

Kragujevac Plaza is the first modern large sized shopping mall opened out of Belgrade. It has 22,000 sq m and the catchment area of the whole central Serbia. Kragujevac Plaza was opened in Q1 2012 and the represented very good mix of the tenants seen for the first time in this part of the country. Among the brands present in the mall are New Zorker, Beba Kids, Carpisa, La Coste, Lisca, Chicco and many others. It has 110 shops, an

nment center which consist of a 6 hall Cinema , various entertainment such Bowling, climbing walls, laser tag, billiards and an indoor toddler playground, as well as 350 seats in food court.

Retail parks are also new schemes on the market. Currently, there are only two retail parks opened in phases 14 km from Belgrade and another in Kragujevac, the largest city and the most

grade but the first opened, located in New Belgrade with good access to the new Ada Bridge. The total size of this regional shopping mall is 28,000 sq m GLA , It disposes of 1,200 parking lots in the underground garage. After the opening in 2007, the mall was the only prime shopping center in Belgrade and Serbia, but since the opening of Ušće, these two malls have been sharing the market and catchment area not only of New Belgrade, but the whole city as well. However, with the opening of

residents from Čukarica and Rakovica (southwestern part of the city) now have easier access to the mall. Anchor tenants in the mall are Zara, New Yorker, Terranova, Marks&Spencer and Maxi

H&A will open its first Serbian store in

Kragujevac Plaza is the first modern large sized shopping mall opened out of Belgrade. It has 22,000 sq m and in Q1 2012 and the represented

very good mix of the tenants seen for the first time in this part of the country. Among the brands present in the mall are New Zorker, Beba Kids, Carpisa, La Coste, Lisca, Chicco and many others. It has 110 shops, an

nment center which consist of a 6 hall Cinema , various entertainment such Bowling, climbing walls,

Retail parks are also new schemes on the market. Currently, there are only two retail parks opened in phases – 14 km from Belgrade and another in Kragujevac, the largest city and the most

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Valuation Report of Aviv Park, Pancevo, Serbia

Aviv Park Pančevo, developed by Israeli investor Aviv Arlon, will have a total GLA of 25,600 sq m after the completion of all six phases. The first phase was opened in April 2010 and was leased to DIS supermarket (4,500 sq m GLA). The two new phases of 7,000 and 3,000 sq m were opened in June and November 2011 respectively. The retail units finalized in the third phase were rented to fashion new comer H&O and local DIY operator Uradi Sam. As we understood, the fourth phase was skipped and the 5th phase was completed recently. By the end of the year, the sixth phase should be completed comprising the cinema and entertainment area. The tenants in the retail park are New Yorker, Peacocks, Jysk, Lilly, Takko, Deichmann etc.

The second Serbian retail park is being developed by the local investor Delta Holding and so far only one phase has been finished and the tenant is Tempo hypermarket of 9,000 sq m. Besides Tempo the tenants in the retail park are furniture store Forma Ideale (1,500 sq m), Neptun electronics, Jysk etc. Upon completion the retail park will have app 30,000 sq m GLA.

Outlet Centers

In Q1 2012 Serbia got its first real outlet center – Fashion Park Outlet in Inñija, located in the close proximaty to Belgrade Novi Sad highway, 42 km away from Belgrade and 36 km away from Novi Sad.. The first phase of 15,000 sq m was opened and the completion of the next two phases is expected by 2016. After the completion of all three phases, the retail park will have 30,000 sq m GLA.

The first phase has 65 stores rented by Tommy Hilfiger, Replay, Bata, Timberland, etc and 1,200 parking lots.

There are some smaller outlet schemes in larger Belgrade zone such as Immo Outlet Center 10,000 sq m, BN Boss Outlet Center 4,000 sq m and Italian Mall 2,000 sq m.

Demand

Due to very low prime retail supply in Serbia, the demand coming from international brands for such types of schemes has a constant upward trend. This results in very low vacancy rate, close to zero, in prime shopping malls as well as new schemes developed in last two years such as retail parks and outlets.

Naturally, the highest demand from international tenants is for two flagship shopping malls located in the capital city, Ušće Shopping Center and Delta City.

As the prime retail stock is very limited in the capital city, the new entrants as well as the tenants alreadz present but willing to expend the business in Serbia, started showing interest for the secondary Serbian cities in the the existing or the projects under construction. The new entrants or brands that expended on Serbian market over the last 18 months are Deichmann, Takko Fashion, Jysk, Parfois, Nine West, Gap, Idexe kids, Diva Accessories, C&A etc.

Future Projects

The increasing demand from the retailers, particularly foreign ones as well as underdeveloped retail market, has directly moved an investment that was pretty inactive in last two years. Many investors, particularly foreigners, that had secured the land sites for retail scheme developments in Belgrade and in the secondary Serbian cities before the crisis, decided to start developing or have already started the development of the postponed projects.

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Valuation Report of Aviv Park, Pancevo, Serbia

Table 6: Large sized retail schemes under construction and in pipeline in Serbia

Nr Project name City Size (m2)

Un

de

r

Co

ns

tru

ctio

n

1 BIG Shopping Center Novi Sad 30,000 2 Delta Retail Park II phase Kragujevac 11,000

3 Stadium Centar Voždovac Belgrade 35,000

4 Fortuna Centar Aranñelovac 5,800

In P

ipe

line

5 Višnjička Plaza Belgrade 40,000

6 Delta Planet at Autokomanda Belgrade 63,000

7 Delta Despota Stefana Blv Belgrade 35,000

8 Shopping Centre at Ada Belgrade 23,000

9 Rajićeva Shopping Mall Belgrade 20,000

10 Trošarina Shopping Mall Belgrade 28,000

11 Belgrade Plaza Belgrade 22,000

12 BIG Shopping Center Šabac 20,000

13 BIG Shopping Center Jagodina 14,000

14 Vivo Shopping Park Jagodina 9,800

15 Fashion Park Outlet II phase Inñija 5,000

16 Fashion Park Outlet III phase Inñija 10,000

17 Capitol Park Šabac 10,000

Source: Jones Lang LaSalle

5.3 Pancevo Retail Market

Modern retail stock in Pančevo is practically non existing, with the exception of Aviv Retail Park, modern retail scheme developed in phases. With the completion of the last phase the retail park will have ca. 26,000 sq m GLA. The tenants in Aviv Retail Park are DIS supermarket - the 1st phase tenant which occupies 4,000 sq m GLA and some of well-known new market entrants such as New Yorker, C&A, H&O,Jysk, Deichmann etc.

In terms of other retail schemes there are two Roda supermarkets, two Idea supermarkets and two Maxi supermarkets.

The high street, however, remains the mainstay of the retail segment in this city, as it is the case in all secondary Serbian cities.

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Valuation Report of Aviv Park, Pancevo, Serbia

6 Valuation Commentary

6.1 Valuation Methodology

Market Value Definition

Market Value is defined by the Royal Institution of Chartered Surveyors (RICS) as the following:

“The estimated amount for which an asset or liability should exchange on the valuation date between a

willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties

had each acted knowledgeably, prudently and without compulsion.”

For the subject purposes the above Market Value definition under RICS meets the Fair Value measurement requirement under IFRS 13.

6.2 Valuation Approach - Income Approach

The Income Approach is a method used to convert the anticipated economic benefits of property ownership into a value estimate through a capitalisation approach.

Within the Income Approach we have used the Direct Capitalization Method. “Direct capitalization is a method used to convert a single year's estimate of income into a value.” Direct capitalization is the most widely used and simplest approach to apply. It is used when income is not expected to vary significantly over time.

Direct capitalization typically involves the analysis of a single year Net Operational Income (NOI). The resultant "NOI" is capitalized by an overall capitalization rate to derive value.

Direct capitalization simulates investor motivation when reliable estimates of income and market derived cap rates are readily available in the market and reveal a consistent pattern. Use of direct capitalization does not require explicit projections of income and assumes that expectations for future income are similar for the subject and comparables.

6.3 General Valuation Assumptions

Our valuation was prepared in accordance with the information obtained from the Client and specifically on the basis of the following assumptions:

(a) We have relied upon the information provided to us by the Client as being complete and correct as to tenure, tenancies, measurements and capacities of properties, planning consents and other relevant information;

(b) There are no Rights of Way, easements, outgoings of an onerous nature or restrictions on use affecting the property, except for ones mentioned in the report, which may have a material effect on the value;

(c) The premises are constructed and used in accordance with all necessary building and planning permissions, and there are no disputes with neighbouring owners or occupiers nor with the local municipal authorities;

(d) The site is not subject to any form of environmental contamination;

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Valuation Report of Aviv Park, Pancevo, Serbia

(e) That the property complies with any fire and life security codes, environmental codes and any other regulatory requirements that may exist;

(f) No structural surveys of the buildings have been undertaken. We are therefore unable to report that they are free of structural faults, rot, infestation or defects of any other nature, including inherent weakness due to the use of construction materials now suspect. No tests were carried out on any of the services;

(g) Forecasts and projections contained in the valuation must be read strictly in conjunction with the explanations, qualifications and assumptions set out in the text. Such forecasts and projections involve a significant element of subjective judgement and are designed to assist buyers in considering possible outcomes. They are not intended to give any assurance that any particular result or outcome will occur. The assumptions on which forecasts and projections are based are considered reasonable at the time of issue of the valuation, but no assurance is given that they are correct or exhaustive or that they will continue to be so in the future;

(h) We have valued the subject property on the assumption that Klupko d.o.o. has 100% share in the property.

6.4 Specific Valuation Assumptions

Estimating the Market Value of the subject property we have made allowances and assumptions for the following:

(g) Our valuation is made on 30th June 2012;

(h) The exchange rate that has been adopted is 115.8203 RSD/EUR according to the National Bank of Serbia as of 30th June 2012;

(i) We have not carried out building’s measurement. We have obtained the tenancy schedule dated 5th May 2012 by Aviv Park Pancevo for the subject property and based our calculations on the assumption that total gross lettable area of the building is 18,921 m2;

(j) The rents are subject to annual indexation according to HICP adopted at the level of 2.5% per annum;

(k) All lease contracts are concluded for the definite period of time (5 or 10 years). We are not aware of any break options specified.

(l) Rent is received monthly which is reflected in our calculations;

(m) For vacant area (Playground) we have assumed 6 months initial void;

(n) The retail park is very new and the ERVs are essentially the same as the contract rents and therefore the ERVs are neither significantly under nor over-rented.

(o) After expiry of the current lease agreements we have adopted the annual indexation according to HICP at the level of 2.5%, applied on the anniversary of signing the lease agreement;

(p) A 3-month void period has been adopted after the current lease agreements expiry. The expiry void covers the leasing void as well as the leasing costs, utilities costs for vacant areas and the incentives for new tenants;

(q) We have also adopted an allowance in respect of unpaid rent and other non-recoverable operating expenses at 1% and 2% of total gross income respectively;

(r) We have applied 2% on-going vacancy rate starting from the 2nd year of our calculations;

(s) We have applied 9.25% discount rate in our calculations.

(t) We have applied 9.00% exit yield in our calculations.

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Valuation Report of Aviv Park, Pancevo, Serbia

Detailed calculations are attached in Appendix 8 of this Report.

6.5 SWOT Analysis

In considering subject property as investment opportunity, we would draw your attention to the following SWOT analysis:

Table 7: SWOT analysis

Strengths Weaknesses

• Location is good on road from Belgrade • Higher than average remaining lease lengths; • Sustainable base rents; • Increasing turnover rents; • Indexing and step rents still to be applied; • High occupancy rate and tenants doing well • Best performing DIS Hypermarket in Serbia

• Could be some tenant type overlap that may have to be replaced.

Opportunities Threats

• No retail projects in pipeline for more than two years. • Waiting list of tenants • New tenants inbound to Serbia still • Increase in NIS production after modernisation which

translates into higher paying jobs.

• Increasing in borrowing rates

6.6 Valuation Summary – Standing Investment

Having regard to the contents of this Report, we are of the opinion that the Market Value of the Aviv Park Pancevo, Pancevo subject to the assumptions outlined in the Report, as at 30th June 2012, was in the region of:

MARKET VALUE OF AVIV PARK PANCEVO STANDING INVESTMENT

€24,900,000

(Twenty Four Million Nine Hundred Thousand Euro)

Market Value is understood as the value of the property estimated without regard to cost of sale or purchase, and without offset for any associated taxes. Therefore no allowances have been made for any expenses of realisation, or for taxation, which might arise in the event of a disposal. The property is considered as if free and clear of all mortgages or other charges which may be secured thereon.

The above value assumes Klupko d.o.o. has 100% share in the property

6.7 Valuation Approach - Residual Method

We have adopted the standard approach for the valuation of developments; the Residual Method of Valuation in accordance with the Practice Statements as set out in the RICS Valuation Standards. The residual value or site value as it is also known is the surplus after total costs including construction, fees, contingency, finance costs and developer's profit are deducted from an estimate of the gross development value (GDV) upon completion. This surplus or residual value represents the amount that a purchaser would be willing to pay for the site.

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Valuation Report of Aviv Park, Pancevo, Serbia

A standardised approach is therefore important to the valuation of an Investment Property under Construction (IPUC) throughout the development to ensure that it is only certain variables that can change and not the approach. We continue to value the development in this way throughout the phases of construction from site acquisition to the point where all risks are removed and therefore any element of developer’s profit is also removed. At this stage the IPUC can be valued as a standing investment.

The level of profit reasonably required by a purchaser (and therefore reflected in arriving at fair value) will diminish as each stage is passed and the risk associated in realising the value of the completed development is reduced. The amount of profit is typically measured as profit on cost or value and will be influenced by the level of pre-lets / pre-sales. Typically profit on cost varies between 10% for de-risked 100% pre-let / pre-sold IPUCs and 25% for 100% speculative IPUCs. We have assumed in our valuation a profit on total cost of 20% at the subject development.

As the development progresses the value of the site (the residual) should increase as remaining costs are reduced, the level of risk and therefore required profit also fall and the remaining time prior to the IPUC becoming income producing and being converted into an investment property is reduced.

We have valued the site based on the plans for the site provided by Klupko d.o.o. on the assumption that the building permit and full planning permission have been granted. The Total Gross Lettable Area for the shopping centre is 18,671 sq m. We have calculated the Gross Development Value of the shopping centre on completion and deducted the costs relating to the entire development.

6.8 General Valuation Assumptions

Our valuation was prepared in accordance with the information obtained from the Client and specifically on the basis of the following assumptions:

a We have relied upon the information provided to us by the Client as being complete and correct as to tenure, tenancies, measurements and capacities of properties, planning consents and other relevant information;

b There are no Rights of Way, easements, outgoings of an onerous nature or restrictions on use affecting the property, except for ones mentioned in the report, which may have a material effect on the value;

c The premises are constructed and used in accordance with all necessary building and planning permissions, and there are no disputes with neighbouring owners or occupiers or with the local municipal authorities;

d The site is not subject to any form of environmental contamination;

e That the property complies with any fire and life security codes, environmental codes and any other regulatory requirements that may exist;

f No structural surveys of the buildings have been undertaken. We are therefore unable to report that they are free of structural faults, rot, infestation or defects of any other nature, including inherent weakness due to the use of construction materials now suspect. No tests were carried out on any of the services;

g Forecasts and projections contained in the valuation must be read strictly in conjunction with the explanations, qualifications and assumptions set out in the text. Such forecasts and projections involve a significant element of subjective judgement and are designed to assist buyers in considering possible outcomes. They are not intended to give any assurance that any particular

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Valuation Report of Aviv Park, Pancevo, Serbia

result or outcome will occur. The assumptions on which forecasts and projections are based are considered reasonable at the time of issue of the valuation, but no assurance is given that they are correct or exhaustive or that they will continue to be so in the future;

h We have valued the subject property on the assumption that Klupko d.o.o. has 100% share in the property.

6.9 Specific Valuation Assumptions – Residual Method

6.9.1 Gross Development Value (GDV)

• Even though planning of the site states that 156,000 sqm of gross external area can be built, we are of the opinion that it is not feasible to build such an amount of area. We have considered the catchment area and the existing area. We have assumed a total of 15,000 sq m will be built which gives a total area of 33,671 sq m (21.5% of total allowable build up). It must be noted that there are current plans to build approximately 4,000 sq m. We have assumed that Aviv Arlon will build an extra 11,000 sq m. However, there are currently no development plans. The planning documents allow the building of commercial and it can therefore be retail, hotels, and office. Due to this fact, we think it is most reasonable to build a small amount of retail. This also reflects the future value implicitly of the land having such favourable building conditions. We also understand that NIS is the largest employer in the city which has higher wages in than other industries in the area. Even though many companies such as Plaza Centres and Delta Holdings are repeatedly announcing the start of their project for the last few years, not one developer has a building permit on the old side of Belgrade.

• The total projected Gross Market Rental Income assuming 100% occupancy is €1.8 million. We have adopted total non-recoverable costs of 5.0% (€0.64 million), which include Loss of Rent of 3% and non-recoverables at 2.0%. Therefore the Total Net Income (assuming Fully Let) is €1.71 million.

• Based on the previous phases we have assumed that the property is 100% pre-let.

• We have applied an initial yield of 9.25%.

• This indicates a GDV less letting fees (€136 thousand) of €18.4 million.

6.9.2 Timing Assumptions

• As far as we understand the developer will receive a building permit in the next few month and start the last phase which is a 4,000 sq m extension.

• However, we have instead opted to reflect the development of 15,000 sq m over the next two years. This is fair consistent with the previous phases .

6.9.3 Construction / Development Costs

• We have adopted the costs of construction as we understand the company has incurred over the previous phases. The Total Investment Cost payable by Klupko d.o.o. to €8.2 million excluding finance.

• The adopted cost are listed in the following table:

Table 8: Total Costs to Completions

Total Costs to Completion

Construction Costs Hard Costs @ €425 sqm €6,375,000 Developer’s Contribution to Fit Out @ €75 sqm €1,125,000

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Valuation Report of Aviv Park, Pancevo, Serbia

Sub-Total €7,500,000

Soft Costs

Letting Fees €136,800

Professional Services €382,500

Contingencies @ 2% €150,000

Sub-Total €669,300

Total Costs Outstanding € 8,169,300

There are some notes on costs: the developer has essentially built 4 phases of the project and this warrants a lower contingency fee due to their experience and the assumption is that build the same product. Moreover, we did not include a marketing fees as generally all marketing fees are being paid by the other tenants currently and the project is so far quite successful which is marketing in itself.

6.9.4 Finance Costs

• We have adopted a finance rate of 7%.

• The interest on the development costs amounts to €592 thousand.

• There is also interest on the site of €1.1 million

6.9.5 Developer’s Profit

• We have adopted a developer’s cost of 20% (€1.7 million) to reflect the level of profit that be required by a purchaser to undertake the development project.

6.9.6 Residual Value

• Total Development Costs (€8.8 million) and the developer’s profit (€1.7 million) amount to €10.4 million. Net Disposal Proceeds (€18.4 million) less total costs (€10.4 million) give a residual value of €8.0 million.

• We deduct interest on the site (€1.0 million) to give a Residual Site Value of (€7.0 million).

A copy of our appraisal is attached at Appendix 8.

6.9.7 Liquidity (Saleability)

The continued turmoil and instability in the financial markets is continuing to cause volatility and uncertainty in the world’s capital markets and real estate markets. There are low levels of liquidity in the real estate market and transaction levels are significantly reduced, resulting in a lack of clarity as to pricing levels and the market drivers. This, combined with a weakening of sentiment towards real estate, has resulted in a continual reappraisal of commercial property prices. Many transactions that are occurring involve vendors who are more compelled to sell, or purchasers who will only buy at discounted prices. In addition, prices agreed during negotiation are frequently reduced prior to exchange of contracts as purchasers bring to bear their greater negotiating position and ability to complete transactions in the current uncertain market. In this environment, prices and values are going through a period of heightened volatility whilst the market absorbs the various issues and reaches its conclusions. As a result there is less certainty with regard to valuations with the result that market values can change rapidly in the current market conditions.

However, it is our opinion that the property has many upside risks that overwhelm the downside risks. It must be remembered that one initial yield is not same as another initial yield. This property has future step rents for some tenants, indexing and turnover rents that the purchaser would have to account for by reducing the yield. However, transparency is clouded by the fact this is a one of a kind property, the first retail park in Serbia, and no other large retail properties have been sold thus far except brown field projects.

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Valuation Report of Aviv Park, Pancevo, Serbia

Generally speaking, retail centre investments make good security for senior debt. They have a variety of different income streams and covenants, and can often respond well to active management.

While our advice is focused on the fully completed scheme, we would comment that development properties do not, in our opinion, constitute ideal security for loan purposes, given the volatility of the development market, which can cause large fluctuations in site values. Bids for development sites of this type are generating downward pressure Detailed calculations are attached in the Appendices to this report.

6.10 SWOT Analysis

In considering subject property as investment opportunity, we would draw your attention to the following SWOT analysis:

Table 9: SWOT analysis

Strengths Weaknesses

• Location is excellent beside a retail park • Positioning of land on the main road • High build up ratios • Current developer experience • Good leasing history of retail park • Existing Retail Park will help lease future parts

• If sold separately would require reparcelisation.

Opportunities Threats

• High build up and coverage ratio. • Flexible planning guidelines allow for other commercial

purposes • Increase NOI • RoE should be better in each phase due to economies

of learning. • Increase in NIS production after modernisation

• Increasing in borrowing rates

6.11 Valuation Summary – Surplus Land

Having regard to the contents of this Report, we are of the opinion that the Market Value of the Aviv Park Pancevo, Pancevo subject to the assumptions outlined in the Report, as at 30th June 2012, was in the region of:

MARKET VALUE OF PART OF THE AVIV ARLON PANCEVO SURPLUS LAND

€7,000,000

(Seven Million Euro)

Market Value is understood as the value of the property estimated without regard to cost of sale or purchase, and without offset for any associated taxes. Therefore no allowances have been made for any expenses of realisation, or for taxation, which might arise in the event of a disposal. The property is considered as if free and clear of all mortgages or other charges which may be secured thereon.

The above value assumes Klupko d.o.o. has 100% share in the property

Transaction costs typically comprise the following:

(a) Stamp duty is 2.5%; however it is not applicable for the transfer of shares of an asset holding company. However, if the shares of a company are sold to acquire real estate i.e. and Special Purpose Vehicle (SPV) then the Stamp Duty is 0.3% of the Market Value.

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(b) Court registration and Notarial fees: vary according to transaction, however these are not significant.

(c) VAT is chargeable on first transaction of a property improved after 1 January 2005 and it is not charging on any later transaction. VAT rate is 18% with exception for residential properties where is 8%. Sale of share is VAT exempt for the first sale.

(d) Agent’s fees at 1-3% of purchase price plus VAT. It is more likely that a fee of 2% would be charged on an investment disposal and a higher fee around 3% charged on the acquisition of land.

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Valuation Report of Aviv Park, Pancevo, Serbia

7 List of Documents Used in Valuation Report

The following documents were used in the Valuation Report on of the Aviv Park Pancevo located in Pancevo, Serbia

• Copy of the Ownership document number 11835, Cadastral Municipality of Pancevo, issued on 8th June 2012;

• Copy of the Site plan, issued on 28th June 2010.

• Urban design for the cadastral parcel number 4733.

• Tenancy Schedule / Rent Roll

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Appendix 1

General Principles Adopted in the Preparation of Report and Valuations

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General Principles Adopted In The Preparation Of Valuations And Reports

These General Principles should be read in conjunction with the firm’s General Terms and Conditions of Business.

It is our objective to discuss and agree the terms of our instructions and the purpose and basis of the valuation, at the outset, to ensure that we fully understand and meet our client’s requirements. Following are the general principles upon which our Valuations and Reports are normally prepared; they apply unless we have agreed otherwise and specifically mentioned the variation in the body of the report. Where appropriate, we will be pleased to discuss variations to suit any particular circumstances, or to arrange for the execution of structural or site surveys, or any other more detailed enquiries. 1. Valuation Standards: All work is carried out in accordance with: (a) The Practice Statements contained in the RICS Valuation Standards published by the Royal Institution of Chartered Surveyors (Seventh Edition), by valuers who conform to the requirements thereof; (b) The Approved European Property Valuation Standards of the European Group of Valuers Associations (TEGoVA).

The standard adopted is set out in our report. 2. Valuation Basis: Our reports state the purpose of the valuation and unless otherwise noted, the basis of valuation is as defined in the appropriate valuation standard. The full definition of the basis which we have adopted is either set out in our report or appended to these General Principles. 3. Source of Information: We accept as being complete and correct the information provided to us by the sources listed, as details of tenant, tenancies, tenant's improvements, planning consents and other relevant matters, as summarised in our report. 4. Disposal Costs and Liabilities: No allowances are made for any expenses of realisation, or for taxation which might arise in the event of disposal. All property is considered as if free and clear of all mortgages or other charges which may be secured thereon. 5. Documentation: We do not normally read leases or documents of title. We assume, unless informed to the contrary, that each property has a good and marketable title, that all documentation is satisfactorily drawn and that there are no encumbrances, restrictions, easements or other outgoings of an onerous nature which would have a material effect on the value of the interest under consideration, nor material litigation pending. Where we have been provided with documentation we recommend that reliance should not be placed on our interpretation without verification by your lawyers. 6. Tenants: Although we reflect our general understanding of a tenant’s status in our valuations, enquiries as to the financial standing of actual or prospective tenants are not normally made unless specifically requested. Where properties are valued with the benefit of lettings, it is therefore assumed, unless we are informed otherwise, that the tenants are capable of meeting their financial obligations under the lease and that there are no arrears of rent or undisclosed breaches of covenant. 7. Measurements: We do not normally measure premises unless specifically requested and base our valuation on the information made available to us. Where measurement is undertaken this is carried out in accordance with either the relevant local codes or the Code of Measuring Practices issued by the Royal Institution of Chartered Surveyors except in the case of agricultural properties or where we specifically state that we have relied on another source. 8. Town Planning and Other Statutory Regulations: Information on town planning is, wherever possible, obtained verbally from the local planning authority and, if confirmation is required, we recommend that verification be obtained from lawyers that:- (a) the position is correctly stated in our report; (b) the property is not adversely affected by any other discussions made or conditions prescribed by public authorities; (c) that there are no outstanding statutory notices.

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Our valuations are prepared on the basis that the premises (and any works thereto) comply with all relevant statutory and EC regulations, including enactments relating to fire regulations. 9. Structural Surveys: Unless expressly instructed, we do not carry out a structural survey, nor do we test the services and we therefore do not give any assurance that any property is free from defect. We seek to reflect in our valuations any readily apparent defects or items of disrepair which we note during our inspection or costs of repair which are brought to our attention.

10. Deleterious Materials: We do not normally carry out investigations on site to ascertain whether any building was constructed or altered using deleterious materials or techniques (including, by way of example high alumina cement concrete, wood wool as permanent shuttering, calcium chloride or asbestos). Unless we are otherwise informed, our valuations are on the basis that no such materials or techniques have been used. 11. Site Conditions: We do not normally carry out investigations on site in order to determine the suitability of ground conditions and services for the purposes for which they are, or are intended to be, put; nor do we undertake archaeological, ecological or environmental surveys. Unless we are otherwise informed, our valuations are on the basis that these aspects are satisfactory and that, where development is contemplated, no extraordinary expenses or delays will be incurred during the construction period due to these matters. 12. Environmental Conditions: Unless expressly instructed, we do not carry out site surveys or environmental assessments, or investigate historical records, to establish whether any land or premises are, or have been, contaminated. Therefore, unless advised to the contrary, our valuations are carried out on the basis that properties are not affected by environmental contamination. However, should our site inspection and further reasonable enquiries during the preparation of the valuation lead us to believe that the land is likely to be contaminated we will discuss our concerns with you. 13. Value Added Tax Valuations are prepared and expressed exclusive of VAT payments, unless otherwise stated.

14. Outstanding Debts: In the case of property where construction works are in hand, or have recently been completed, we do not normally make allowance for any liability already incurred, but not yet discharged, in respect of completed works, or obligations in favour of contractors, subcontractors or any members of the professional or design team. 15. Confidentiality: Our Valuations and Reports are confidential to the party to whom they are addressed for the specific purpose to which they refer, and no responsibility whatsoever is accepted to any third parties. Neither the whole, nor any part, nor reference thereto, may be published in any document, statement or circular, nor in any communication with third parties, without our prior written approval of the form and context in which it will appear.

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Appendix 2

General Terms and Condit ions of Business

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GENERAL TERMS AND CONDITIONS OF BUSINESS INTRODUCTION 1 When the Terms Apply

These Terms of Business (the “Terms”) apply where Jones Lang LaSalle provides a service to a client and there is no written agreement for the provision of that service or if there is, to the extent that these Terms do not conflict with the terms of that written agreement. In the case of conflict between these Terms and the terms of any written agreement, the terms of the written agreement shall prevail to the extent of the conflict. Reference in these Terms to the agreement means the written or informal agreement that incorporates these Terms (the “Agreement”).

2 Jones Lang LaSalle Jones Lang LaSalle means Jones Lang LaSalle d.o.o Beograd, with its seat at Usce Tower, 6 Mihajla Pupina Boulevard, 11070 New Belgrade, Serbia or any other member of the Jones Lang LaSalle group of companies that provides services or the relevant part of the services.

SERVICE LEVEL 3 Services

Jones Lang LaSalle is to provide all services to the specification and performance level stated in writing or, if none is stated, to the specification and performance level that it ordinarily provides in accordance with Jones Lang LaSalle’s duty of care as set out below. Any variations must be agreed in writing.

4 What is not included Jones Lang LaSalle has no responsibility for anything that is beyond the scope of the service so defined. In particular, it has no obligation to provide nor liability for:

• an opinion on price unless specifically instructed to carry out a formal valuation; • advice, or failure to advise, on the condition of a property unless specifically instructed to carry out a formal

survey; • the security or management of property unless specifically instructed to arrange it; • the safety of those visiting a property, unless that is specified in its instructions.

5 Valuations

Jones Lang LaSalle must comply with professional requirements for the rotation of valuers, and the implications of this are to be agreed in writing with those clients who require valuation services.

LIABILITY AND DUTY OF CARE 6 Duty of Care

Jones Lang LaSalle owes to the client a duty to act with reasonable skill and care in providing services, complying with the client’s instructions where those instructions do not conflict with (a) these Terms, (b) the Agreement or (c) applicable law and professional rules. Jones Lang LaSalle is not obliged to carry out any instructions of the client which conflict with the applicable law, regulations and professional rules.

7 Liability to the Client Jones Lang LaSalle has no liability for the consequences including delay in or failure to provide the services, of any failure by the client or any agent of the client:

• promptly to provide information or other material that Jones Lang LaSalle reasonably requires, or where that information or material is inaccurate or incomplete. The client warrants that, where it provides information or material to Jones Lang LaSalle, Jones Lang LaSalle is entitled to rely on its accuracy.

• to follow Jones Lang LaSalle’s advice or recommendations.

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The liability of Jones Lang LaSalle to the client for its own negligence causing death or personal injury or for fraud is unlimited, but otherwise its liability is:

• limited to 2 (two) times the fixed fees amount agreed with Jones Lang LaSalle per occurrence or series of occurrences arising from one event,

• excluded to the extent that the client, or someone on the client’s behalf for whom Jones Lang LaSalle is not responsible is responsible,

• excluded if caused by circumstances beyond Jones Lang LaSalle’s reasonable control, • excludes loss of profit, revenue and anticipated savings, • excludes indirect, special and consequential loss, • (where Jones Lang LaSalle is but one of the parties liable) limited to the share of loss reasonably

attributable to Jones Lang LaSalle on the assumption that all other parties pay the share of loss attributable to them (whether or not they do),

• not (so far as permitted by law) increased by any condition or warranty prescribed by law, • in any case limited to a maximum of EUR 1,000,000 (one million euro) in aggregate.

Jones Lang LaSalle shall not be liable for any hidden defects in any real property sold, bought or leased, unless Jones Lang LaSalle was aware of these defects and did not inform the client hereof.

8 Liability to Third Parties

Jones Lang LaSalle owes no duty of care and has no liability to anyone but its client. No third party has any rights unless there is specific written agreement to the contrary.

9 Liability for Third Parties

Jones Lang LaSalle has no liability for products or services that it reasonably needs to obtain from others in order to provide services. Jones Lang LaSalle may delegate to a third party the provision of any part of services, but if it does so: (a) without the client’s approval, Jones Lang LaSalle is responsible for what that third party does; (b) with the client’s approval or at the client’s request, Jones Lang LaSalle is not responsible for what that

third party does. 10 Protection of Employees

Apart from for fraud or a criminal conduct no employee of the Jones Lang LaSalle group of companies has any personal liability to the client, and that neither the client nor anyone representing the client will make a claim or bring proceedings against an employee or former employee personally.

11 Complaints Resolution Procedure

The client agrees that it will not take any action or commence any proceedings against Jones Lang LaSalle before it has first referred its complaint to Jones Lang LaSalle in accordance with Jones Lang LaSalle’s complaints procedure, details of which are available upon request.

12 Liability to Jones Lang LaSalle The client agrees to indemnify Jones Lang LaSalle against all third party claims (including without limitation all third party actions, claims, proceedings, loss, damages, costs and expenses) that relates in any way to the provision of services, except a liability that a court of competent jurisdiction decides (or Jones Lang LaSalle agrees) was caused by the fraud, willful default or negligence of Jones Lang LaSalle or of a delegate for whom Jones Lang LaSalle is responsible under the Agreement.

DELIVERING THE SERVICE

13 Timetable Jones Lang LaSalle is to use reasonable endeavours to comply with the client’s timetable, but is not responsible for not doing so unless specifically agreed in writing. Even then, Jones Lang LaSalle is not liable for delay that is beyond its control.

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14 E-mail and On-line Services

Jones Lang LaSalle may use electronic communication and systems to provide services, making available to the client any software required that is not generally available.

15 Insurance

Jones Lang LaSalle agrees to purchase and maintain appropriate insurance policies, in particular professional indemnity insurance. Upon request Jones Lang LaSalle may provide evidence of such insurance.

16 Conflict of Interest

If Jones Lang LaSalle becomes aware of a conflict of interest it is to advise the client promptly and recommend an appropriate course of action.

17 Publicity

Neither Jones Lang LaSalle nor its client may publicise or issue any specific information to the media about services or its subject matter without the written consent of the other.

18 Intellectual Property

All intellectual property rights in material supplied by the client belong to the client and in material prepared by Jones Lang LaSalle belong to Jones Lang LaSalle, unless otherwise agreed in writing. Each has a non-exclusive right to use the material provided for the purposes for which it is supplied or prepared. No third party has any right to use it without the specific consent of the owner.

19 Confidential Information

Each party must keep confidential all confidential information and material of commercial value to the other party of which it becomes aware, but it may: (a) use it to the extent reasonably required in providing services, (b) disclose it if the other party agrees, (c) disclose it if required to do so by law, regulation or other competent authority. Jones Lang LaSalle will comply with personal data protection regulations. This obligation continues for a period of two years after termination of the agreement.

20 The effect of Termination on Client Material

On termination of the Agreement Jones Lang LaSalle may, to comply with legal, regulatory or professional requirements, keep one copy of all material it then has that was supplied by or on behalf of the client in relation to the service. The client may request the return or destruction of all other client material (save for electronic back-ups).

REMUNERATION 21 Not specified

Where the fees and expenses payable for services are not specified in writing, Jones Lang LaSalle is entitled to: (a) a fair and reasonable fee by reference to time spent, and (b) reimbursement of expenses properly incurred on the client’s behalf.

22 Part Performance Where services are not performed in full, Jones Lang LaSalle is entitled to a reasonable fee proportionate to services provided as estimated by Jones Lang LaSalle.

23 VAT and Withholding

The client must pay VAT at the rate then current on issue of a valid VAT invoice and any applicable withholding tax. 24 Interest on Overdue Amounts

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If an invoice is not paid in full within 7 days (or such other period as agreed in writing between the parties), Jones Lang LaSalle may charge interest on the balance due at the then applicable daily rate as set by the National Bank of Serbia.

MISCELLANEOUS 25 Assignment

The client may assign the benefit of the Agreement, but must first obtain the written consent of Jones Lang LaSalle, which will not be unreasonably withheld.

26 Termination

The client or Jones Lang LaSalle may terminate the Agreement immediately by written notice to the other, if the other: • has not satisfactorily rectified a substantial or persistent breach of the agreement within the reasonable

period specified in an earlier notice to rectify it. • is insolvent according to the laws of its country of incorporation.

27 Effect of Termination on Claim

Termination of the Agreement does not affect any claims that arise before termination or the entitlement of Jones Lang LaSalle to its proper fees up to the date of termination or to be reimbursed its expenses.

28 Waiver and Severance Failure to enforce any of these Terms is not a waiver of any right to subsequently enforce that or any other term of the Agreement. The invalidity, illegality and unenforceability in whole or in part of any provisions of the Agreement shall not affect the validity, legality or enforceability of its remaining provisions which shall remain in full force and effect.

29 Notices

A notice is valid if in writing addressed to the last known address of the addressee and is to be treated as served: • when delivered, if delivered by hand during normal business hours, • at the time of receipt upon delivery confirmation, if sent by registered mail, • at the time of receipt upon delivery confirmation, if sent by fax or electronic mail.

30 Governing Law and Jurisdiction

These General Terms and Conditions of Business and the terms of the instruction shall be governed and construed in accordance with the laws of Serbia. All disputes shall be finally settled by the appropriate and relevant court in Belgrade.

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Appendix 3

Definition of Market Value

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The Basis of Valuation

Our valuation is carried out on the basis of the property’s Market Value. For the subject purposes the below Market Value definition under RICS meets the Fair Value measurement requirement under IFRS 13.

The Market Value is defined in the RICS Red Book as:

‘The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion’.

Interpretive Commentary, as published in the RICS Valuation – Professional Standards (incorporating the International Valuation Standards):

1. In applying market value, regard must also be had to the conceptual framework set out in paragraphs 31–35 of the IVS Framework, including the requirement that the valuation amount reflects the actual market state and circumstances as of the effective valuation date.

2. The basis of market value is an internationally recognised definition. It represents the figure that would appear in a hypothetical contract of sale at the valuation date. Valuers need to ensure that in all cases the basis is set out clearly in both the instructions and the report.

3. Market value ignores any existing mortgage, debenture or other charge over the property.

4. Notwithstanding the disregard of special value (see definition in paragraphs 44–47 of the IVS Framework) where the price offered by prospective buyers generally in the market would reflect an expectation of a change in the circumstances of the property in the future, this element of ‘hope value’ is reflected in market value. Examples of where the hope of additional value being created or obtained in the future may have an impact on the market value include:

• the prospect of development where there is no current permission for that development; and

• the prospect of synergistic value (see definition in paragraph 48 of the IVS Framework) arising from merger with another property, or interests within the same property, at a future date.

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Appendix 4

Location Map

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Appendix 5

Site Plan

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Appendix 7

Photographs

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COPYRIGHT © JONES LANG LASALLE IP, INC. 2012. All Rights Reserved

Appendix 8

Calculations

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30.41666667

RSD 0.0100 EUR

EUR 115.8203 RSD

Ty pe Rate

2.50%

0.00%

0.00%

1.00%

0.00%

0.00%

0.00%

2.50%

Gross rental income p.a.* Valuation date 30/06/2012 EURO

€ 2,245,012 CF start date 01/07/2012 €

RSD 260,018,007 Exit Yield 9.00%

EURO

Net rental income p.a. Discount Rate 9.25% €

€ 2,177,662

RSD 252,217,467 Initial Yield 8.75%

RSD

Minimum Guaranteed Rent Yield on EMRV 8.25%

€ 2,175,012

RSD 252,217,467 Vacant duration 3 months EURO

€ 1,334

Annual EMRV Residual Value on Passing Rent RSD

€ 2,095,680 RSD 154,460

RSD 242,722,286 Valuation Currency EURO

* Estimated income in the first year of Calculations

Cash Flow Input Assumptions

2,883,900,000

Gross Market Value

24,900,000

Market Value

Exchange Rates at 30 June 2012 according

to the NBS

Aviv Park Pancevo, Pancevo

MUCIP

Local country CPIEMRV Indexation

3 Fixed at4 Fixed at

MV / sq m

MV / sq m

Market Value

Indexation

24,900,000

HICP

1 Fixed at2 Fixed at

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Cash Flows calculated Monthly All figures shown are annuities

2012-07-01 2013-07-01 2014-07-01 2015-07-01 2016-07-01 2017-07-01 2018-07-01 2019-07-01 2020-07-01 2021-07-01 2022-07-01

2013-06-30 2014-06-30 2015-06-30 2016-06-30 2017-06-30 2018-06-30 2019-06-30 2020-06-30 2021-06-30 2022-06-30 2023-06-30

YEAR 7 8 9 10 11

INCOME

MINIMUM GUARANTEED RENT 2,175,012 2,252,855 2,311,681 2,148,201 2,277,965 2,352,401 2,385,313 2,211,045 2,378,530 2,154,444 2,254,490

TEMPORARY LEASE 0.00% 0 0 0 0 0 0 0 0 0 0 0

TURNOVER GROWTH 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50%

VARIABLE RENT 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000

% VARIABLE INCOME 3.22% 3.11% 3.03% 3.26% 3.07% 2.98% 2.93% 3.17% 2.94% 3.25% 3.10%

TOTAL INCOME 2,245,012 2,322,855 2,381,681 2,218,201 2,347,965 2,422,401 2,455,313 2,281,045 2,448,530 2,224,444 2,324,490

EXPENSES % on rents

Management fees 0.00% 0 0 0 0 0 0 0 0 0 0 0

Vacancy 2.00% 0 46,457 47,634 44,364 46,959 48,448 49,106 45,621 48,971 44,489 46,490

Unpaid rent 1.00% 22,450 23,229 23,817 22,182 23,480 24,224 24,553 22,810 24,485 22,244 23,245

Other non-recoverable costs 2.00% 44,900 46,457 47,634 44,364 46,959 48,448 49,106 45,621 48,971 44,489 46,490

Other Costs amount 0 0 0 0 0 0 0 0 0 0 0

TOTAL EXPENSES 5.00% 67,350 116,143 119,084 110,910 117,398 121,120 122,766 114,052 122,427 111,222 116,225

Aviv Park Pancevo, Pancevo

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NET OPERATING INCOME € 2,177,662 € 2,206,712 € 2,262,597 € 2,107,291 € 2,230,567 € 2,301,281 € 2,332,547 € 2,166,992 € 2,326,104 € 2,113,222 € 2,208,266

RUNNING YIELD (Before CAPEX) 8.72% 8.83% 9.06% 8.43% 8.93% 9.21% 9.34% 8.67% 9.31% 8.46% 8.84%

RUNNING YIELD (After CAPEX) 8.75% 8.87% 9.09% 8.47% 8.96% 9.25% 9.37% 8.71% 9.35% 8.49% 8.87%

DISCOUNT RATE 9.25%

NPV MGR INCOME PAID IN ADVANCE Monthly 2,088,195 1,980,249 1,859,913 1,583,041 1,534,678 1,451,880 1,347,221 1,141,517 1,125,764 933,875

NPV ADDITIONAL INCOME PAID IN ADVANCE 67,240 61,547 56,336 51,566 47,200 43,204 39,546 36,198 33,133 30,327

NPV MGR COST PAID IN ADVANCE (in arrear) -64,695 -102,118 -95,839 -81,703 -79,160 -74,755 -69,355 -58,977 -57,948 -48,187

10,204,603undiscounted ex it 24,536,283

NPV NET INCOME PAID IN ADVANCE Monthly 2,090,740 1,939,678 1,820,411 1,552,905 1,502,718 1,420,329 1,317,412 1,118,737 1,100,949 916,015

(in arrear)

EXIT YIELD 9.00%

YIELD on EMRV 8.25%

Average YIELD 8.93%

CAPEX + Fit-out + Letting (nominal) Amount 0 0 0 57,600 12,613 0 0 42,739 8,938 45,765

CAPEX + Fit-out + Letting (discounted) Amount 0 0 0 42,432 8,505 0 0 22,101 4,230 19,827

24,900,000 EURO € 1,334 / per sqm

24,900,000 EURO € 1,334 / p sq.m

(purchaser's cost 0.00% )

MARKET VALUE (after capex)

MARKET VALUE (after capex)

€/sqm € €

18,921 18,921.00 795.00

Average

Unexpired

Term

6Yrs 4M € 9.54 € 180,525.00 € 2,166,300.00

Lease end

date Net Area

Add-on

factor (%)

Vacant

areaVacantCompany name Lease startRetailer

Retail Category Sector -

Analysis

Total Area

(m2)

Lease start in

CF

Void

PeriodMGR pa in CF

Unexpired

Term (Years)

Lease

length

Month of EMRV

application

Rent

MGR/ sq

m

Unit #Lp. Status

Cu

rren

cy

Average

weighted

rent/sqm

MGR per month

in CFMGR/sq m in CF

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Valuation Date 30/06/2012

Estimated Annual Income / Total Sale Currency Euro

Gross Internal Area Gross Rentable Area No of Units Lease length Contracted Rent / EMRV Parking / EMRV Total GOI pa Rent Deductions NOI pa sq m sq m Parking years Euro/mth/sq m Euro/mth Euro % Euro

Use Type Gross Residential Area Auxiliary Sale price Sale price Total Sale Cost of Sale Net SaleOffice (pre-let) - - - - - - - 5% - Office (vacant) - - - - - - - 0% - Retail (pre-let) - - - - - - - 0% - Retail (vacant) - 15,000 - - 10.00 - 1,800,000 5% 1,710,000 Industrial (pre-let) - - - - - - - 0% - Industrial (vacant) - - - - - - - 0% - Residential - - - - - - - 3% - Residential - - - - - - - 0% - Total Rentable/Salable Area - 15,000 - 1,710,000

per sq m Total GDVEstimated Gross Development Value Office (pre-let) 0.00% - -

before Purchaser's Costs Office (vacant) 0.00% - -

Retail (pre-let) Capitalisation Rate 0.00% - -

Retail (vacant) @ 9.25% 1,232 18,486,486

Industrial (pre-let) 0.00% - -

Industrial (vacant) 0.00% - -

Blended Cape Rate 9.25%Residential Total Sale - -

Total GDV 18,486,486Euro/sq m 1,232

Purchaser's costs

Agents & Legal Fees 0.0%Stamp Fees 0.0%Notary Fees 0.0%Total Purchaser's costs 0.0% -

0.0%Estimated Net Development Value (After Purchaser's Costs) Euro 18,486,486

Timing Assumptions Cumulative

Month nos (inclusive) YearsYears Start End Appraisal as at 06/2012 at end

Lead-in period 0.00 1 0 Demolition start 06/2012 0.00Demolition 0.00 1 0 Construction start 06/2012 0.00Construction 2.00 1 24 Completion date 06/2014 2.00Void period / Unit sale period 0.00 25 24 Lease / sale commence date 06/2014 2.00Rent-free period 0.00 25 24 Rent commence and sale date 06/2014 2.00

Project Costs

Demolition Costs GRA Euro/sq mBuildings - - - Structures - - -

-

Hard Costs GRA Euro/sq mOffice hard costs - - - Office fit-out - - - Retail hard costs 15,000 425 6,375,000 Retail fit-out 15,000 75 1,125,000 Industrial hard costs - - - Industrial fit-out - - - Residential hard costs - - - Residential other - - -

7,500,000 Other Construction Costs 0.00% of hard costs - Construction Contingency 2.00% of hard costs 150,000

150,000 7,650,000

Professional Fees (Design and Planning, Construction Management, Quantity Surveyor etc.)

Professional Fees 5% of hard cost & contingency 382,500 Other Consultancy 0% of hard cost & contingency -

382,500 Marketing, Letting & Legals 8,032,500 Marketing 0% of NOI & Sales - Letting Agents & Legals 8% of NOI 136,800

136,800 8,169,300

Financing Costs (On Project Costs Excluding Land Cost)7.00% base rate + margin

Over Years 2.00Applied to (%) of Costs 50.00% 591,866 Construction financing 591,866

Total Estimated Project Costs (Excluding Developer's Profit & Site Purchase) Euro 8,761,166

ProgressProject Construction Costs Incurred 30/06/2012 0% - Pending Project Cost (incl. Financing) 30/06/2012 100% 8,761,166

as % of totalDeveloper's Profit on Pending Project Cost

Developers's Profit 10% of NDV (after purchaser's costs)19% of Pending Project Cost (incl. Financing)

1,680,590

Pending Estimated Project Costs & Developer's Profit (Excluding Site Purchase) Euro 10,441,755

Residual value

Estimated Net Development Value (After Purchaser's Costs) 18,486,486 Pending Estimated Project Costs & Developer's Profit (Excluding Site Purchase) 10,441,755 Balance Available for Site Purchase before Purchaser's Deduction of Purchaser's Costs 8,044,731

Carried interest charges

Financing @ 7.00% base rate + marginOver years 2.00 1,018,151

7,026,580 Site purchaser's costs

Agents & Legal Fees 0%Stamp Fees 0%Notary Fees 0%Total Purchaser's costs 0% -

Site Value (After Deduction of Purchaser's Costs) Site Area (sq m) Euro 7,026,580

(Round) € 7,000,000

Site area 26,660 m2Euro/sq m € 263.56

(Round Euro/sq m) € 260

RSD (Round) Local currency/m2 RSD 30110

Internal Rate of Return IRR 22.99%

I Market Value based on Direct Capitalization calculation, including allowance in respect of vacancy and other non-recoverable costsII Exchange Rates at 30th June 2012 according to the Central Bank

Exchange rate local currency/ valuation currency RSD/Euro 115.820Exchange rate valuation currency/ local currency Euro/RSD 0.009

RESIDUAL VALUATION

Aviv Park Pancevo, Pancevo, Serbia

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(in Euro)

-5.0 % of cost -2.50 % of cost .0 % of cost 2.50 % of cost 5.0 % of cost

- 50 bps 8,405,266 8,177,261 7,949,255 7,721,249 7,493,243

- 25 bps 7,931,114 7,703,108 7,475,102 7,247,096 7,019,091

0 bps 7,482,591 7,254,585 7,026,580 6,798,574 6,570,568

Capitalisation Rate Variance 25 bps 7,057,675 6,829,669 6,601,663 6,373,658 6,145,652

50 bps 6,654,550 6,426,544 6,198,538 5,970,532 5,742,526

Commercial Development -5.0 % cost -2.50 % cost .0 % cost 2.50 % cost 5.0 % cost

- 50 bps 320 310 300 290 280

- 25 bps 300 290 280 270 260

0 bps 280 270 260 260 250

Capitalisation Rate Variance 25 bps 260 260 250 240 230

50 bps 250 240 230 220 220

Commercial Development

RESIDUAL VALUATION SENSITIVITY

Property Name, City, Country

Pending Estimated Project Costs & Developer's Profit (Excluding Site Purchase)

Costs Variance

Estimated Net Development Value (After Purchaser's Costs)

Estimated Net Development Value (After Purchaser's Costs)

Site Value

(Round Euro/sq m)

Page 62: Aviv

Nebojša Nešovanović MRICS

Joint Head of Valuation

Professional Services Department

Jones Lang LaSalle d.o.o.

6 Mihajla Pupina Boulevard

11070 Belgrade

+381 11 2200 108

[email protected]

Bryan Beaton MRICS

Joint Head of Valuation

Professional Services Department

Jones Lang LaSalle d.o.o.

6 Mihajla Pupina Boulevard

11070 Belgrade

+381 11 2200 109

[email protected]

COPYRIGHT © JONES LANG LASALLE IP, INC. 2012.

This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without

the prior written consent of Jones Lang LaSalle IP, Inc.

The information contained in this publication has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in respect of

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